US Perspective—05.10.10
The Jacobsen Commentary and Market Opinion—05.10.10
Courtesy of www.thejacobsen.com
Market activity and analysis
The market on Monday was fairly busy for a Monday with a modest number of sales reported. The outlook from pundits ranged from neutral to firm, but few people were expecting much change in prices. While Monday’s prices were within the previous week’s trading range, a number of people believed the market would be active.
Reasons people cited for predicting an upbeat week included late interest the previous week, the US$ trading down against the euro and commodities picking up. However, there were still a few in the trade who were not so sure and were taking a wait-and-see approach.
A couple of sources reported seeing a strong interest in cows at the beginning of the week. In spite of heightened enthusiasm among traders, not many sales were reported on Tuesday—only four. Prices were up a dollar on northern and southwestern branded cows at $36 and $35.
A lot of business was anticipated for Wednesday. However, after numerous conversations with people in the trade, it turned out that there were a lot of bids for steer hides at steady (or maybe a little better) money but the packers and processors were not willing to take the business.
A source reported that buyers were stepping up for cows and low-grade material and that he thinks prices in this area will be higher this coming week. There were only a few sales reported on Wednesday and prices fell within the prior week’s trading levels.
With the market firming up, buyers once again stood down on Thursday as prices reached $80 for steer hides. Early week trading was light for steer hides but showed signs of encouragement for cow hides and lower grades. This may have been an effort on the part of tanners to hold their average hide cost lower while better grading summer hides are still available.
Thursday trading picked up significantly from earlier in the week with all reported selections showing increases. Overall, the Jacobsen Hide Index was up $1.12 at $69.23. A couple of steer sales were reported at $73 FOB, but suppliers were in agreement that $80 C&F had not been attained yet this week. HNH, HBH, and CBS were up at $62, $60, and $67 respectively.
Suppliers’ views on the market on Thursday showed a vast array of opinions. A couple of people noted that there was good interest, especially on steer hides. Some called the market “steady” and one person said that it was “very hard to get more money”.
The processors were much more active in the market than the packers on Friday, albeit both at fairly consistent levels. This falls in line with some of the reports offered on Friday that the market is firm, but perhaps not as firm as packers would like it to be. Processors seemed to be trying to keep any increase measured while the packers were seeing good demand for hides and higher prices.
The week in review
Enthusiasm continued among suppliers who have become convinced there is more demand than hides available, at least for the near term. One source predicted last week that we would see the $80 C&F China barrier breached, noting they had turned down $79 C&F China for HNS. For reference, some of the higher prices the previous week included $72 FOB for HTS and $73 for HNS, which were knocking at the door of $80 C&F. Not everyone in the trade was quite so excited. Some expected the market to trade in its existing range with little chance of moving up or down.
Tanners continued to struggle to keep leather prices on a par with increasing hide prices; they were met with strong resistance. Sources report that the major brands are asking for more and more manmade material in new production lines in order to keep their margins intact. Tanners fear that if programmes with synthetic materials become established, this will have an unfortunate and lasting effect on leather business.
For the week ending September 23, the USDA export sales report had another strong showing with sales and shipments of total whole hides and wet blue at 647,100 and 558,400, respectively. Both were under the week’s slaughter of 663,000.
For the year through to week 38, the weekly average for slaughter was 645,763, combined wet blue and whole hide sales were 570,600 and shipments were 597,978. Net hide sales reductions for the week were 48,555, with the bulk coming from China (25,643) and Hong Kong (20,087).
